2 Umale, Et Al V ASB Realty Corporation GR 181126 Jun 15, 2011

9/16/23, 9:36 PM SUPREME COURT REPORTS ANNOTATED VOLUME 652
G.R. No. 181126. June 15, 2011.*
LEONARDO S. UMALE, [deceased] represented by CLARISSA

VICTORIA, JOHN LEO, GEORGE LEONARD, KRISTINE,
MARGUERITA ISABEL, AND MICHELLE ANGELIQUE, ALL
SURNAMED UMALE, petitioners, vs. ASB REALTY
CORPORATION, respondent.
Real Party-in-Interest; Real party-in-interest is defined as the party

who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.—There is no denying that ASB
Realty, as the owner of the leased premises, is the real party-in-interest in
the unlawful detainer suit. Real party-in-interest is defined as “the party who
stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.”
Corporation Law; As a creature of law, the powers and attributes of a
corporation are those set out, expressly or impliedly, in the law.—As a
creature of law, the powers and attributes of a corporation are those set out,
expressly or impliedly, in the law. Among the general powers granted by
law to a corporation is the power to sue in its own name. This power is
granted to a duly-organized corporation, unless specifically revoked by
another law.
Same; Corporate Rehabilitation; Corporate Rehabilitation is defined
as the restoration of the debtor to a position of successful operation and
solvency, if it is shown that its continuance of operation is economically
feasible and its creditors can recover by way of the present value of
payments projected in the plan more if the corporation continues as a going
concern than if it is immediately liquidated.—Corporate rehabilitation is
defined as “the restoration of the debtor to a position of successful operation
and solvency, if it is shown that its continuance of operation is economically
feasible and its creditors can recover by way of the present value of
payments projected in the plan more if the corporation continues as a going
concern than if it is immediately liquidated.” It was first introduced in the
Philippine legal system through PD 902-A, as amended. The
_______________
* FIRST DIVISION.
216
216 SUPREME COURT REPORTS ANNOTATED
https://www.central.com.ph/sfsreader/session/0000018a9e37a1fafa793196000d00d40059004a/p/ARL077/?username=Guest 1/17
Umale vs. ASB Realty Corporation
intention of the law is “to effect a feasible and viable rehabilitation by

preserving a floundering business as a going concern, because the assets of
a business are often more valuable when so maintained than they would be
when liquidated.”
Same; Same; There is nothing in the concept of corporate
rehabilitation that would ipso facto deprive the Board of Directors and
corporate officers of a debtor corporation of control such that it can no
longer enforce its right to recover its property from an errant lessee.—The
interim rehabilitation receiver of the debtor corporation “does not take over
the control and management of the debtor corporation.” Likewise, the
rehabilitation receiver that will replace the interim receiver is tasked only to
monitor the successful implementation of the rehabilitation plan. There is
nothing in the concept of corporate rehabilitation that would ipso facto
deprive the Board of Directors and corporate officers of a debtor
corporation, such as ASB Realty, of control such that it can no longer
enforce its right to recover its property from an errant lessee.
PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
The facts are stated in the opinion of the Court.
Rivera, Santos & Maranan for petitioners.
Javier, Jose, Mendoza and Associates for respondent.
DEL CASTILLO, J.:

Being placed under corporate rehabilitation and having a receiver
appointed to carry out the rehabilitation plan do not ipso facto
deprive a corporation and its corporate officers of the power to
recover its unlawfully detained property.
Petitioners filed this Petition for Review on Certiorari1 assailing
the October 15, 2007 Decision2 of the Court of Appeals
_______________
1 Rollo, pp. 32-58.

2 Id., at pp. 60-75; penned by Associate Justice Fernanda Lampas Peralta and
concurred in by Associate Justices Edgardo P. Cruz and Normandie B. Pizarro.
217
VOL. 652, JUNE 15, 2011 217

(CA) in CA-G.R. SP No. 91096, as well as its January 2, 2008

Resolution.3 The dispositive portion of the assailed Decision reads:
“WHEREFORE, the Decision dated March 28, 2005 of the trial court is
affirmed in toto.
SO ORDERED.”4
Factual Antecedents
This case involves a parcel of land identified as Lot 7, Block 5,
Amethyst Street, Ortigas Center, Pasig City which was originally
owned by Amethyst Pearl Corporation (Amethyst Pearl), a company
that is, in turn, wholly-owned by respondent ASB Realty
Corporation (ASB Realty).
In 1996, Amethyst Pearl executed a Deed of Assignment in
Liquidation of the subject premises in favor of ASB Realty in
consideration of the full redemption of Amethyst Pearl’s outstanding
capital stock from ASB Realty.5 Thus, ASB Realty became the
owner of the subject premises and obtained in its name Transfer
Certificate of Title No. PT-105797,6 which was registered in 1997
with the Registry of Deeds of Pasig City.
Sometime in 2003, ASB Realty commenced an action in the
Metropolitan Trial Court (MTC) of Pasig City for unlawful detainer7
of the subject premises against petitioner Leonardo S. Umale
(Umale). ASB Realty alleged that it entered into a lease contract8
with Umale for the period June 1, 1999-May
_______________
3 Id., at p. 77.
4 CA Decision, p. 16; id., at p. 75.
5 Id., at pp. 167-168.
6 Id., at pp. 124-129.
7 The original complaint was filed on September 3, 2003 (CA Rollo, pp. 83-86)
but was amended on October 1, 2003 (Id., at pp. 89-92). The complaint was docketed
as Civil Case No. 10427 and raffled off to Branch 70 of the MTC Pasig.
8 Rollo, pp. 175-179.
218

31, 2000. Their agreement was for Umale to conduct a pay-parking

business on the property and pay a monthly rent of P60,720.00 to
ASB Realty.
Upon the contract’s expiration on May 31, 2000, Umale
continued occupying the premises and paying rentals albeit at an
increased monthly rent of P100,000.00. The last rental payment
made by Umale to ASB Realty was for the June 2001 to May 2002
period, as evidenced by the Official Receipt No. 565119 dated
November 19, 2001.
On June 23, 2003, ASB Realty served on Umale a Notice of
Termination of Lease and Demand to Vacate and Pay.10 ASB Realty
stated that it was terminating the lease effective midnight of June 30,
2003; that Umale should vacate the premises, and pay to ASB Realty
the rental arrears amounting to P1.3 million by July 15, 2003. Umale
failed to comply with ASB Realty’s demands and continued in
possession of the subject premises, even constructing commercial

establishments thereon.
Umale admitted occupying the property since 1999 by virtue of a
verbal lease contract but vehemently denied that ASB Realty was his
lessor. He was adamant that his lessor was the original owner,
Amethyst Pearl. Since there was no contract between himself and
ASB Realty, the latter had no cause of action to file the unlawful
detainer complaint against him.
In asserting his right to remain on the property based on the oral
lease contract with Amethyst Pearl, Umale interposed that the lease
period agreed upon was “for a long period of time.”11 He then
allegedly paid P1.2 million in 1999 as one year advance rentals to
Amethyst Pearl.12
_______________
9 Id., at p. 181.
10 Id., at p. 180.
11 Defendant’s Position Paper, p. 3; CA Rollo, p. 148.
12 Id.
219
VOL. 652, JUNE 15, 2011 219

Umale further claimed that when his oral lease contract with
Amethyst Pearl ended in May 2000, they both agreed on an oral
contract to sell. They agreed that Umale did not have to pay rentals
until the sale over the subject property had been perfected between
them.13 Despite such agreement with Amethyst Pearl regarding the
waiver of rent payments, Umale maintained that he continued
paying the annual rent of P1.2 million. He was thus surprised when
he received the Notice of Termination of Lease from ASB Realty.14
Umale also challenged ASB Realty’s personality to recover the
subject premises considering that ASB Realty had been placed under
receivership by the Securities and Exchange Commission (SEC) and
a rehabilitation receiver had been duly appointed. Under Section
14(s), Rule 4 of the Administrative Memorandum No. 00-8-10SC,
otherwise known as the Interim Rules of Procedure on Corporate
Rehabilitation (Interim Rules), it is the rehabilitation receiver that
has the power to “take possession, control and custody of the
debtor’s assets.” Since ASB Realty claims that it owns the subject
premises, it is its duly-appointed receiver that should sue to recover
possession of the same.15
ASB Realty replied that it was impossible for Umale to have
entered into a Contract of Lease with Amethyst Pearl in 1999
because Amethyst Pearl had been liquidated in 1996. ASB Realty
insisted that, as evidenced by the written lease contract, Umale
contracted with ASB Realty, not with Amethyst Pearl. As further
proof thereof, ASB Realty cited the official receipt evidencing the
rent payments made by Umale to ASB Realty.
_______________
13 Id., at pp. 4-5; id., at pp. 149-150.

14 Id., at p. 5; id., at p. 150.
15 Id., at pp. 13-14; id., at pp. 158-159.
220

Ruling of the Metropolitan Trial Court

In its August 20, 2004 Decision,16 the MTC dismissed ASB
Realty’s complaint against Umale without prejudice. It held that
ASB Realty had no cause to seek Umale’s ouster from the subject
property because it was not Umale’s lessor. The trial court noted an
inconsistency in the written lease contract that was presented by
ASB Realty as basis for its complaint. Its whereas clauses cited ASB
Realty, with Eden C. Lin as its representative, as Umale’s lessor; but
its signatory page contained Eden C. Lin’s name under the heading
Amethyst Pearl. The MTC then concluded from such inconsistency
that Amethyst Pearl was the real lessor, who can seek Umale’s
ejectment from the subject property.17
Likewise, the MTC agreed with Umale that only the
rehabilitation receiver could file suit to recover ASB Realty’s
property.18 Having been placed under receivership, ASB Realty had
no more personality to file the complaint for unlawful detainer.
Ruling of the Regional Trial Court
ASB Realty appealed the adverse MTC Decision to the Regional
Trial Court (RTC),19 which then reversed20 the MTC ruling.
The RTC held that the MTC erred in dismissing ASB Realty’s
complaint for lack of cause of action. It found sufficient evidence to
support the conclusion that it was indeed ASB
_______________
16 Rollo, pp. 226-241; penned by Presiding Judge Jose P. Morallos.

17 MTC Decision, p. 14; Rollo, p. 239.
18 Id., at pp. 13-14; id., at pp. 238-239.
19 The appeal was docketed as SCA No. 2724 and raffled off to Branch 161 of the
RTC Pasig.
20 Rollo, pp. 307-319; penned by Pairing Judge Amelia A. Fabros.
221
VOL. 652, JUNE 15, 2011 221

Realty that entered into a lease contract with Umale, hence, the
proper party who can assert the corresponding right to seek Umale’s
ouster from the leased premises for violations of the lease terms. In
addition to the written lease contract, the official receipt evidencing
Umale’s rental payments for the period June 2001 to May 2002 to
ASB Realty adequately established that Umale was aware that his
lessor, the one entitled to receive his rent payments, was ASB
Realty, not Amethyst Pearl.
ASB Realty’s positive assertions, supported as they are by
credible evidence, are more compelling than Umale’s bare negative
assertions. The RTC found Umale’s version of the facts incredible. It
was implausible that a businessman such as Umale would enter into
several transactions with his alleged lessor—a lease contract,
payment of lease rentals, acceptance of an offer to sell from his
alleged lessor, and an agreement to waive rentals—sans a sliver of
evidence.
With the lease contract between Umale and ASB Realty duly
established and Umale’s failure to pay the monthly rentals since
June 2002 despite due demands from ASB Realty, the latter had the
right to terminate the lease contract and seek his eviction from the
leased premises. Thus, when the contract expired on June 30, 2003
(as stated in the Notice of Termination of Lease), Umale lost his
right to remain on the premises and his continued refusal to vacate
the same constituted sufficient cause of action for his ejectment.21
With respect to ASB Realty’s personality to file the unlawful
detainer suit, the RTC ruled that ASB Realty retained all its
corporate powers, including the power to sue, despite the
appointment of a rehabilitation receiver. Citing the Interim Rules,
the RTC noted that the rehabilitation receiver was not granted
therein the power to file complaints on behalf of the corporation.22
_______________
21 RTC Decision, pp. 9-11; Rollo, pp. 315-317.

22 Id., at pp. 8-9; id., at pp. 314-315.
222

Moreover, the retention of its corporate powers by the

corporation under rehabilitation will advance the objective of
corporate rehabilitation, which is to conserve and administer the
assets of the corporation in the hope that it may eventually be able to
go from financial distress to solvency. The suit filed by ASB Realty
to recover its property and back rentals from Umale could only
benefit ASB Realty.23
The dispositive portion of the RTC Decision reads as follows:
“WHEREFORE, premises considered, the appealed decision is hereby

reversed and set aside. Accordingly, judgment is hereby rendered in favor of
the plaintiff-appellant ordering defendant-appellee and all persons claiming

rights under him:
1) To immediately vacate the subject leased premises located at Lot 7,
Block 5, Amethyst St., Pearl Drive, Ortigas Center, Pasig City and deliver
possession thereof to the plaintiff-appellant;
2) To pay plaintiff-appellant the sum of P1,300,000.00 representing
rentals in arrears from June 2002 to June 2003;
3) To pay plaintiff-appellant the amount of P100,000.00 a month
starting from July 2003 and every month thereafter until they finally vacate
the subject premises as reasonable compensation for the continued use and
occupancy of the same;
4) To pay plaintiff-appellant the sum of P200,000.00 as and by way of
attorney’s fees; and the costs of suit.
SO ORDERED.”24
Umale filed a Motion for Reconsideration25 while ASB Realty

moved for the issuance of a writ of execution pursuant to Section 21
of the 1991 Revised Rules on Summary Procedure.26
_______________
23 Id., at p. 8; id., at p. 314.

24 Id., at pp. 12-13; id., at pp. 318-319.
25 Rollo, pp. 320-340.
26 Id., at pp. 341-344.
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VOL. 652, JUNE 15, 2011 223

In its July 26, 2005 Order, the RTC denied reconsideration of its
Decision and granted ASB Realty’s Motion for Issuance of a Writ of
Execution.27
Umale then filed his appeal28 with the CA insisting that the
parties did not enter into a lease contract.29 Assuming that there was
a lease, it was at most an implied lease. Hence its period depended
on the rent payments. Since Umale paid rent annually, ASB Realty
had to respect his lease for the entire year. It cannot terminate the
lease at the end of the month, as it did in its Notice of Termination of
Lease.30 Lastly, Umale insisted that it was the rehabilitation receiver,
not ASB Realty, that was the real party-in-interest.31
Pending the resolution thereof, Umale died and was substituted
by his widow and legal heirs, per CA Resolution dated August 14,
2006.32
Ruling of the Court of Appeals
The CA affirmed the RTC Decision in toto.33
According to the appellate court, ASB Realty fully discharged its
burden to prove the existence of a lease contract between ASB
Realty and Umale,34 as well as the grounds for eviction.35 The
veracity of the terms of the lease contract presented by ASB Realty
was further bolstered, instead of demol-
_______________
27 Id., at pp. 353-357.

28 The appeal was docketed as CA-G.R. CV No. 91096. CA Rollo, pp. 2-41.
29 Petition for Review, pp. 25-30; id., at pp. 26-31.
30 Id., at pp. 31-33; id., at pp. 32-34.
31 Id., at pp. 12-16; id., at pp. 13-17.
32 Rollo, pp. 589-590.
33 CA Decision, p. 16; CA Rollo, p. 666.
34 Id., at p. 11; id., at p. 661.
35 Id., at p. 13; id., at p. 663.
224

ished, by Umale’s admission that he paid monthly rents in

accordance therewith.36
The CA found no merit in Umale’s claim that in light of Article
1687 of the Civil Code the lease should be extended until the end of
the year. The said provision stated that in cases where the lease
period was not fixed by the parties, the lease period depended on the
payment periods. In the case at bar, the rent payments were made on
a monthly basis, not annually; thus, Umale’s failure to pay the
monthly rent gave ASB Realty the corresponding right to terminate
the lease at the end of the month.37
The CA then upheld ASB Realty’s, as well as its corporate
officers’, personality to recover an unlawfully withheld corporate
property. As expressly stated in Section 14 of Rule 4 of the Interim
Rules, the rehabilitation receiver does not take over the functions of
the corporate officers.38
Petitioners filed a Motion for Reconsideration,39 which was
denied in the assailed January 2, 2008 Resolution.40
Issues
The petitioners raise the following issues for resolution:41
1. Can a corporate officer of ASB Realty (duly authorized by the Board of

Directors) file suit to recover an unlawfully detained corporate property
despite the fact that the corporation had already been placed under
rehabilitation?
2. Whether a contract of lease exists between ASB Realty and Umale; and
_______________
36 Id., at p. 11; id., at p. 661.

37 Id., at pp. 11-13; id., at pp. 661-663.
38 Id., at pp. 7-10; id., at pp. 657-660.
39 CA Rollo, pp. 667-678.
40 Id., at p. 708.
41 Petitioners’ Memorandum, p. 11; Rollo, p. 651.
225
VOL. 652, JUNE 15, 2011 225

3. Whether Umale is entitled to avail of the lease periods provided in Article

1687 of the Civil Code.
Our Ruling
Petitioners ask for the dismissal of the complaint for unlawful

detainer on the ground that it was not brought by the real party-in-
interest.42 Petitioners maintain that the appointment of a
rehabilitation receiver for ASB Realty deprived its corporate officers
of the power to recover corporate property and transferred such
power to the rehabilitation receiver. Section 6, Rule 59 of the Rules
of Court states that a receiver has the power to bring actions in his
own name and to collect debts due to the corporation. Under
Presidential Decree (PD) No. 902-A and the Interim Rules, the
rehabilitation receiver has the power to take custody and control of
the assets of the corporation. Since the receiver for ASB Realty did
not file the complaint for unlawful detainer, the trial court did not
acquire jurisdiction over the subject property.43
Petitioners cite Villanueva v. Court of Appeals,44 Yam v. Court of
Appeals,45 and Abacus Real Estate Development Center, Inc. v. The
Manila Banking Corporation,46 as authorities for the rule that the
appointment of a receiver suspends the authority of the corporation
and its officers over its property and effects.47
ASB Realty counters that there is no provision in PD 902-A, the
Interim Rules, or in Rule 59 of the Rules of Court that divests
corporate officers of their power to sue upon the appointment of a
rehabilitation receiver.48 In fact, Section 14,
_______________
42 Id., at p. 12; id., at p. 652.

43 Id., at pp. 12-13; id., at pp. 652-653.
44 314 Phil. 297; 244 SCRA 395 (1995).
45 362 Phil. 344; 303 SCRA 1 (1999).
46 495 Phil. 86; 455 SCRA 97 (2005).
47 Petitioners’ Memorandum, pp. 13-15; Rollo, pp. 653-655.
48 Respondent’s Memorandum, p. 9; id., at p. 673.
226

Rule 4 of the Interim Rules expressly limits the receiver’s power by

providing that the rehabilitation receiver does not take over the
management and control of the corporation but shall closely oversee
and monitor the operations of the debtor.49 Further, the SEC Rules of
Procedure on Corporate Recovery (SEC Rules), the rules applicable
to the instant case, do not include among the receiver’s powers the
exclusive right to file suits for the corporation.50
The Court resolves the issue in favor of ASB Realty and its
officers.
There is no denying that ASB Realty, as the owner of the leased
premises, is the real party-in-interest in the unlawful detainer suit.51
Real party-in-interest is defined as “the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled
to the avails of the suit.”52
What petitioners argue is that the corporate officer of ASB Realty
is incapacitated to file this suit to recover a corporate property
because ASB Realty has a duly-appointed rehabilitation receiver.
Allegedly, this rehabilitation receiver is the only one that can file the
instant suit.
Corporations, such as ASB Realty, are juridical entities that exist
by operation of law.53 As a creature of law, the powers and attributes
of a corporation are those set out, expressly or impliedly, in the law.
Among the general powers granted by law to a corporation is the
power to sue in its own name.54 This power is granted to a duly-
organized corporation, unless specifically revoked by another law.
The question becomes: Do the laws on corporate rehabilitation—
particularly PD 902-A,
_______________
49 Id., at p. 7; id., at p. 671.

50 Id., at p. 6; id., at p. 670.
51 Consumido v. Ros, G.R. No. 166875, July 31, 2007, 528 SCRA 696, 702.
52 Rules of Court, Rule 3, Section 2.
53 Corporation Code, Section 2.
54 Corporation Code, Section 36(1).
227
VOL. 652, JUNE 15, 2011 227

as amended,55 and its corresponding rules of procedure—forfeit the

power to sue from the corporate officers and Board of Directors?
Corporate rehabilitation is defined as “the restoration of the
debtor to a position of successful operation and solvency, if it is
shown that its continuance of operation is economically feasible and
its creditors can recover by way of the present value of payments
projected in the plan more if the corporation continues as a going
concern than if it is immediately liquidated.”56 It was first introduced
in the Philippine legal system through PD 902-A, as amended.57 The

intention of the law is “to effect a feasible and viable rehabilitation
by preserving a floundering business as a going concern, because the
assets of a business are often more valuable when so maintained
than they would be when liquidated.”58 This concept of preserving
the corporation’s business as a going concern while it is undergoing
rehabilitation is called debtor-in-possession or debtor-in-place. This
means that the debtor corporation (the corporation undergoing
rehabilitation), through its Board of Directors and corporate officers,
remains in control of its business and properties, subject only to the
monitoring of the appointed rehabilitation receiver.59 The concept of
debtor-in-possession, is carried out more particularly in the SEC
_______________
55 On July 18, 2010, a new law on rehabilitation was enacted—Republic Act No.
10142 or the Financial Rehabilitation and Insolvency Act (FRIA) of 2010. Section
146 thereof states that the new law governs rehabilitation petitions filed after FRIA
has taken effect.
56 2009 Rules of Procedure on Corporate Rehabilitation, Rule 2, Section 1.
57 Reorganization of the Securities and Exchange Commission with Additional
Powers and Placing the Said Agency Under the Administrative Supervision of the
Office of the President.
58 China Banking Corporation v. ASB Holdings, G.R. No. 172192, December 23,
2008, 575 SCRA 247, 260.
59 Catindig, Notes on Selected Commercial Laws, 161 (2003).
228

Rules, the rule that is relevant to the instant case.60 It states therein
that the interim rehabilitation receiver of the debtor corporation
“does not take over the control and management of the debtor
corporation.”61 Likewise, the rehabilitation receiver that will replace
the interim receiver is tasked only to monitor the successful
implementation of the rehabilitation plan.62 There is nothing in the
concept of corporate rehabilitation that would ipso facto deprive63
the Board of Directors and corporate officers of a debtor
corporation, such as ASB Realty, of control such that it can no
longer enforce its right to recover its property from an errant lessee.
To be sure, corporate rehabilitation imposes several restrictions
on the debtor corporation. The rules enumerate the prohibited
corporate actions and transactions64 (most of which
_______________
60 While The Securities Regulation Code (Republic Act No. 8799), transferred
SEC’s jurisdiction over corporate rehabilitation proceedings to the regular courts, it
retained within SEC’s jurisdiction all pending rehabilitation cases as of June 30, 2000
until finally disposed. ASB Realty’s petition for rehabilitation was filed on May 2,
2000 and remained pending as of June 30, 2000, such that it remained within the SEC
jurisdiction.
61 SEC Rules of Procedure on Corporate Recovery, Section 4-12.
63 All of this is not to say that a corporation under rehabilitation cannot be
deprived of control and management at all. To be sure, in warranted cases, the SEC is
authorized to place the corporation under a management committee that would
replace its corporate management and board of directors and assume their powers
over the corporation (Presidential Decree No. 902-A, as amended, Section 6(d); SEC
Rules of Procedure on Corporate Recovery, Rule V, Sections 5-1 and 5-3). This
instance however is not the case before us. There is no allegation whatsoever that
ASB Realty had been placed under a management committee.
64 According to Section 2-12 of the SEC Rules of Procedure on Corporate
Recovery, the following acts are prohibited and, if done, may be nullified by the SEC:
229
VOL. 652, JUNE 15, 2011 229

involve some kind of disposition or encumbrance of the

corporation’s assets) during the pendency of the rehabilitation
proceedings but none of which touch on the debtor corporation’s
right to sue. The implication therefore is that our concept of
rehabilitation does not restrict this particular power, save for the
caveat that all its actions are monitored closely by the receiver, who
can seek an annulment of any prohibited or anomalous transaction or
agreement entered into by the officers of the debtor corporation.
Petitioners insist that the rehabilitation receiver has the power to
bring and defend actions in his own name as this power is provided
in Section 6 of Rule 59 of the Rules of Court.
Indeed, PD 902-A, as amended, provides that the receiver shall
have the powers enumerated under Rule 59 of the Rules of Court.
But Rule 59 is a rule of general application. It applies to different
kinds of receivers—rehabilitation receivers, receivers of entities
under management, ordinary receivers, receivers in liquidation—and
for different kinds of situations. While the SEC has the discretion65
to authorize the rehabilitation receiver, as the case may warrant, to
exercise the powers in Rule 59, the SEC’s exercise of such
discretion cannot simply be assumed. There is no allegation
whatsoever in this case that the SEC gave ASB Realty’s
rehabilitation receiver the exclusive right to sue.
_______________
1. any sale, encumbrance, transfer, or disposition of the debtor’s property

outside the normal course of business in which the corporation is engaged (Section 4-
4 (c), SEC Rules of Procedure on Corporate Recovery); and
2. any payments of the debtor corporation’s outstanding liabilities (Section 4-
4(d), SEC Rules of Procedure on Corporate Recovery).
65 Presidential Decree No. 902-A, as amended, Section 6(m); SEC Rules of
Procedure on Corporate Recovery, Section 4-25 (f).
230

Petitioners cite Villanueva,66 Yam,67 and Abacus Real Estate68 as

authorities for their theory that the corporate officers of a
corporation under rehabilitation is incapacitated to act. In
Villanueva,69 the Court nullified the sale contract entered into by the
Philippine Veterans Bank on the ground that the bank’s insolvency
restricted its capacity to act. Yam,70 on the other hand, nullified the
compromise agreement that Manphil Investment Corporation
entered into while it was under receivership by the Central Ban k. In
Abacus Real Estate,71 it was held that Manila Bank’s president had
no authority to execute an “option to purchase” contract while the
bank was under liquidation.
These jurisprudence are inapplicable to the case at bar because
they involve banking and financial institutions that are governed by
different laws.72 In the cited cases, the applicable banking law was
Section 2973 of the Central Bank
_______________
66 Supra note 44.

67 Supra note 45.
68 Supra note 46.
69 Supra note 44 at pp. 309-311.
70 Supra note 45 at p. 351.
71 Supra note 46 at pp. 97-98.
72 The prevailing law is Republic Act No. 8791 or the General Banking Law of
2000. Section 69 thereof (in relation to Section 30 of Republic Act No. 7653, entitled
The New Central Bank Act) continues to forbid banks or non-bank financial
corporations from doing business upon a finding of insolvency.
73 Sec. 29. Proceedings upon insolvency.—Whenever, upon examination by the
head of the appropriate supervising or examining department or his examiners or
agents into the condition of any bank or non-bank financial intermediary performing
quasi-banking functions, it shall be disclosed that the condition of the same is one of
insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department head concerned
forthwith, in writing, to inform the Monetary Board of the facts, and the Board may,
upon finding the statements of the department head to be true, forbid the institution to
do business in the Philippines x x x
231
VOL. 652, JUNE 15, 2011 231

74
Act. In stark contrast to rehabilitation where the corporation
retains control and management of its affairs, Section 29 of the
Central Bank Act, as amended, expressly forbids the bank or the
quasi-bank from doing business in the Philippines.
Moreover, the nullified transactions in the cited cases involve
dispositions of assets and claims, which are prohibited transactions
even for corporate rehabilitation75 because these may be prejudicial
to creditors and contrary to the rehabilitation plan. The instant case,
however, involves the recovery of assets and collection of
receivables, for which there is no prohibition in PD 902-A.
While the Court rules that ASB Realty and its corporate officers
retain their power to sue to recover its property and the back rentals
from Umale, the necessity of keeping the receiver apprised of the
proceedings and its results is not lost upon this Court. Tasked to
closely monitor the assets of ASB Realty, the rehabilitation receiver
has to be notified of the developments in the case, so that these
assets would be managed in accordance with the approved
rehabilitation plan.
Coming to the second issue, petitioners maintain that ASB Realty
has no cause of action against them because it is not their lessor.
They insist that Umale entered into a verbal lease agreement with
Amethyst Pearl only. As proof of this verbal agreement, petitioners
cite their possession of the
_______________
The Monetary Board shall thereupon determine within sixty days whether the
institution may be reorganized or otherwise placed in such a condition so that it may
be permitted to resume business with safety to its depositors and creditors and the
general public and shall prescribe the conditions under which such resumption of
business shall take place as well as the time for fulfillment of such conditions. x x x
(Emphasis supplied.)
74 Republic Act No. 265, as amended.
232

premises, and construction of buildings thereon, sans protest from

Amethyst Pearl or ASB Realty.76
Petitioners concede that they may have raised questions of fact
but insist nevertheless on their review as the appellate court’s ruling
is allegedly grounded entirely on speculations, surmises, and
conjectures and its conclusions regarding the termination of the
lease contract are manifestly absurd, mistaken, and impossible.77
Petitioners’ arguments have no merit. Ineluctably, the errors they
raised involve factual findings,78 the review of which is not within
the purview of the Court’s functions under Rule 45, particularly
when there is adequate evidentiary support on record.
While petitioners assail the authenticity of the written lease

contract by pointing out the inconsistency in the name of the lessor
in two separate pages, they fail to account for Umale’s actions which
are consistent with the terms of the contract—the payment of lease
rentals to ASB Realty (instead of his alleged lessor Amethyst Pearl)
for a 12-month period. These matters cannot simply be brushed off
as sheer happenstance especially when weighed against Umale’s
incredible version of the facts—that he entered into a verbal lease
contract with Amethyst Pearl; that the term of the lease is for a “very
long period of time”; that Amethyst Pearl offered to sell the leased
premises and Umale had accepted the offer, with both parties not
demanding any written documentation of the transaction and without
any mention of the purchase price; and that finally, Amethyst Pearl
agreed that Umale need not pay rentals until the perfection of the
sale. The Court is of the same mind as the appellate court that it is
simply inconceiv-
_______________

77 Id., at pp. 7-8; id., at pp. 647-648.
78 U-bix Corporation v. Milliken & Company, G.R. No. 173318, September 23,
2008, 566 SCRA 284, 288; Solar Harvest Inc. v. Davao Corrugated Carton
Corporation, G.R. No. 176868, July 26, 2010, 625 SCRA 448, 457.
233
VOL. 652, JUNE 15, 2011 233

able that a businessman, such as petitioners’ predecessor-in-interest,

would enter into commercial transactions with and pay substantial
rentals to a corporation nary a single documentation.
Petitioners then try to turn the table on ASB Realty with their
third argument. They say that under Article 1687 of the New Civil
Code, the period for rent payments determines the lease period.
Judging by the official receipt presented by ASB Realty, which
covers the 12-month period from June 2001 to May 2002, the lease
period should be annual because of the annual rent payments.79
Petitioners then conclude that ASB Realty violated Article 1687 of
the New Civil Code when it terminated the lease on June 30, 2003,
at the beginning of the new period. They then implore the Court to
extend the lease to the end of the annual period, meaning until May
2004, in accordance with the annual rent payments.80
In arguing for an extension of lease under Article 1687,
petitioners lost sight of the restriction provided in Article 1675 of the
Civil Code. It states that a lessee that commits any of the grounds for
ejectment cited in Article 1673, including non-payment of lease
rentals and devoting the leased premises to uses other than those
stipulated, cannot avail of the periods established in Article 1687.81
Moreover, the extension in Article 1687 is granted only as a

matter of equity. The law simply recognizes that there are instances
when it would be unfair to abruptly end the lease contract causing
the eviction of the lessee. It is only for these clearly unjust situations
that Article 1687 grants the court the discretion to extend the lease.82
_______________

80 Id., at p. 22; id., at p. 662.
81 LL and Company Development & Agro-Industrial Corporation v. Huang Chao
Chun, 428 Phil. 665, 674-675; 378 SCRA 612, 621 (2002).
82 Id.
234

The particular circumstances of the instant case however, do not

inspire granting equitable relief. Petitioners have not paid, much less
offered to pay, the rent for 14 months and even had the temerity to
disregard the pay-and-vacate notice served on them. An extension
will only benefit the wrongdoer and punish the long-suffering
property owner.83
WHEREFORE, the petition is DENIED. The October 15, 2007
Decision and January 2, 2008 Resolution of the Court of Appeals in
CA-G.R. SP No. 91096 are hereby AFFIRMED. ASB Realty
Corporation is ordered to FURNISH a copy of the Decision on its
incumbent Rehabilitation Receiver and to INFORM the Court of its
compliance therewith within 10 days.
SO ORDERED.
Velasco, Jr. (Acting Chairperson), Leonardo-De Castro,

Bersamin** and Perez, JJ., concur.
Petition denied, judgment and resolution affirmed.
Note.—The suspension of action for claims against a corporation

under rehabilitation receiver or management committee embraces all
phases of the suit. Furthermore, the actions that are suspended cover
all claims against a distressed corporation whether for damages
founded on a breach of contract of carriage, labor cases, collection
suits or any other claims of a pecuniary nature. (Philippine Airlines,
Inc. vs. Zamora, 514 SCRA 584 [2007])
——o0o——
_______________
83 Chua v. Court of Appeals, 408 Phil. 877, 893; 356 SCRA 753, 766-767 (2001);
Guiang v. Samano, G.R. No. 50501, April 22, 1991, 196 SCRA 114, 120.
** In lieu of Chief Justice Renato C. Corona, per Special Order No. 1000 dated
June 8, 2011.
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2 Umale, Et Al V ASB Realty Corporation GR 181126 Jun 15, 2011

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9/16/23, 9:36 PM SUPREME COURT REPORTS ANNOTATED VOLUME 652

G.R. No. 181126. June 15, 2011.*

LEONARDO S. UMALE, [deceased] represented by CLARISSA

Real Party-in-Interest; Real party-in-interest is defined as the party

216 SUPREME COURT REPORTS ANNOTATED

Umale vs. ASB Realty Corporation

intention of the law is “to effect a feasible and viable rehabilitation by

PETITION for review on certiorari of the decision and resolution of

DEL CASTILLO, J.:

1 Rollo, pp. 32-58.

VOL. 652, JUNE 15, 2011 217

(CA) in CA-G.R. SP No. 91096, as well as its January 2, 2008

218 SUPREME COURT REPORTS ANNOTATED

31, 2000. Their agreement was for Umale to conduct a pay-parking

possession of the subject premises, even constructing commercial

VOL. 652, JUNE 15, 2011 219

13 Id., at pp. 4-5; id., at pp. 149-150.

220 SUPREME COURT REPORTS ANNOTATED

Ruling of the Metropolitan Trial Court

16 Rollo, pp. 226-241; penned by Presiding Judge Jose P. Morallos.

VOL. 652, JUNE 15, 2011 221

21 RTC Decision, pp. 9-11; Rollo, pp. 315-317.

222 SUPREME COURT REPORTS ANNOTATED

Moreover, the retention of its corporate powers by the

“WHEREFORE, premises considered, the appealed decision is hereby

the plaintiff-appellant ordering defendant-appellee and all persons claiming

Umale filed a Motion for Reconsideration25 while ASB Realty

23 Id., at p. 8; id., at p. 314.

VOL. 652, JUNE 15, 2011 223

27 Id., at pp. 353-357.

224 SUPREME COURT REPORTS ANNOTATED

ished, by Umale’s admission that he paid monthly rents in

The petitioners raise the following issues for resolution:41

1. Can a corporate officer of ASB Realty (duly authorized by the Board of

36 Id., at p. 11; id., at p. 661.

41 Petitioners’ Memorandum, p. 11; Rollo, p. 651.

VOL. 652, JUNE 15, 2011 225

3. Whether Umale is entitled to avail of the lease periods provided in Article

Petitioners ask for the dismissal of the complaint for unlawful

42 Id., at p. 12; id., at p. 652.

226 SUPREME COURT REPORTS ANNOTATED

Rule 4 of the Interim Rules expressly limits the receiver’s power by

49 Id., at p. 7; id., at p. 671.

VOL. 652, JUNE 15, 2011 227

as amended,55 and its corresponding rules of procedure—forfeit the

in the Philippine legal system through PD 902-A, as amended.57 The

228 SUPREME COURT REPORTS ANNOTATED

VOL. 652, JUNE 15, 2011 229

involve some kind of disposition or encumbrance of the

1. any sale, encumbrance, transfer, or disposition of the debtor’s property

65 Presidential Decree No. 902-A, as amended, Section 6(m); SEC Rules of

Procedure on Corporate Recovery, Section 4-25 (f).

230 SUPREME COURT REPORTS ANNOTATED

Petitioners cite Villanueva,66 Yam,67 and Abacus Real Estate68 as

66 Supra note 44.

VOL. 652, JUNE 15, 2011 231

232 SUPREME COURT REPORTS ANNOTATED

premises, and construction of buildings thereon, sans protest from

While petitioners assail the authenticity of the written lease

76 Petitioners’ Memorandum, pp. 17-20; Rollo, pp. 657-660.

VOL. 652, JUNE 15, 2011 233

able that a businessman, such as petitioners’ predecessor-in-interest,

Moreover, the extension in Article 1687 is granted only as a